Noah Bierman fills in some local details about the story of a billionaire trying to influence the government to drive down the stock price of a company he is shorting, as reported last week by The New York Times. Globe, “Markey may have exaggerated claims about Herbalife:”
Some of the most compelling details cited by Senator Edward J. Markey in his recent demand for a federal investigation into the Herbalife supplement sales company came from two unnamed Massachusetts residents, including the allegation that one family had “reported that it lost $130,000, including its entire 401(k).”
The stories formed the emotional backbone of Markey’s assertion “that Herbalife’s business practices may be having a negative impact on my constituents” in a letter demanding a Federal Trade Commission investigation.
But Markey and his staff did little to check out the allegations, according to Globe interviews with the two constituents. As a result, it appears Markey provided an incomplete story of their circumstances and may have overstated the financial losses they suffered at the hands of Herbalife.
A depressing story of insider D.C. politics working for N.Y. money, according to the Times:
In some cases, the hiring was even more strategic. In Massachusetts, Mr. Ackman’s firm hired the lobbyist Larry Rasky, who was an aide to Senator Edward J. Markey, Democrat of Massachusetts, when Mr. Markey was a member of the House. … Mr. Ackman also retained the Dewey Square Group, a Washington-based firm that specializes in “grass-roots advocacy,” to influence officials by recruiting surrogates to speak out against Herbalife in emails, tweets, letters or rallies.
Dewey Square group (“An early innovator of on-the-ground grassroots advocacy and lobbying“) was founded in Boston. Its Multicultural Affairs practice asserts special expertise in manipulating influencing communities of color:
Dewey Square Group’s Multicultural Affairs practice has assembled some of the best known and respected strategists in the African American, Hispanic, and Asian American communities in the United States to provide invaluable knowledge, experience, and influence within these communities and in the political, public policy, and business arenas.
There is, of course, a different possible narrative: that Herbalife is a Ponzi scheme that should be investigated and Markey is being heroic in his call for an inquiry. But Ackerman’s $1 billion bet against the company creates such an enormous conflict of interest it is hard to have confidence in the investor’s sincerity.
What do you think?
kbusch says
I guess if we can’t afford actual regulators we can rely on hedge fund managers to do sniff out corruption and do it for us — and earn a bounty by shoring stock.
Is this how libertarians and Ayn Rand fantasizers think we can go without regulators?
Trickle up says
I’ll tell you one thing, Herbalife is in for the inspection of its life now.
JimC says
It’s early days, but I respect Markey’s announcement that he sticks by his position. That’s the right answer to give to the question.
Also, the hiring of Dewey Square Group connects no dots. That place is unbelievably wired in. Check its staff page — some really heavy hitters.
SomervilleTom says
Herbalife is brazen pyramid scheme, literally a “snake oil” business. At least Amway products sort-of do what they claim to do. All I saw in in Mr. Bierman’s piece was a long string of insinuations and cheapshots.
To me, the most glaring thing about the piece is the utter absence of even a mention about whether or not the concerns raised by Senator Markey might be valid.
This was a piece more suited for the op-ed page of the Herald than the front page of the Globe.
methuenprogressive says
But, when you’re a big hitter, they’re gonna throw at your head every now and then.
SomervilleTom says
At least Ms. Vennochi’s slanders were on the opinion page, where they belong.
Suppose extensive research showed that both Mr. Ackman and Mr. Markey took steps in their respective positions reflecting an agreement that the Apollo program put astronauts on the surface of the moon. Would that, too, make them part of a scandal?
Mr. Ackman has said from the beginning that he shorted Herbalife because he thinks they are an overvalued fraud and he wants to see them destroyed. Mr. Markey has said from the beginning that he began investigating Herbalife because of the many and well-founded complaints that they are ripping off Mr. Markey’s constituents.
Why is it so hard for Mr. Bierman, Ms. Vennochi, and their editors at the Globe to see that these two sets of facts do NOT make a scandal or a conspiracy?
Hmm … perhaps the new Globe smells money to be made.
bob-gardner says
of politicians for whom no set of facts, no matter how damning can be anything but a smear.
Come off it Tom. This stinks and you know it. Running down a company so some hedge fund manager can cash in on his short postition? That’s your idea of public service?
SomervilleTom says
I agree with you that Tim Murray was the victim of an equally scurrilous attack from the Globe.
I guess you also bought into the SwiftBoat lies.
thombeales says
Interesting that George Soros, yeah that guy, has a hefty stake in Herbalife.
centralmassdad says
It was covered by the NPR “Planet Money” team quite awhile ago. Ackman had been attempting to call attention to what he sees as a problem for a long time before that, but found regulatory indifference.
The company works like Amway, and recruits people to “make money by working from home.” Each of those people has to buy a stock of the snake oil to sell, but really only make money by convincing other people to become “sales representatives” who buy a stock of their own. They count all of this stock purchased by “sales representatives” as product that has been sold, even though no consumer has purchased anything.
The company’s response has at all times to attack the accuser rather than to explain how its business works. The large short position was, if I recall the report correctly, largely an attempt to overcome the complete indifference of the regulatory authorities.
If the short position is profitable, it will not be because Markey or anyone else did something wrong, it will be because Ackman was correct that the company is a fraudulent enterprise.